10 Lessons in Corporate Ethics From the GM Recall

By business.com editorial staff,
business.com writer
| Updated
May 28, 2020
Image Credit: Prostock-Studio / Getty Images

The GM recall reminded the American car giant that with great power comes great responsibility. Learn from its mistakes with these 10 tips.

  • Business ethics are critical to maintaining a good business reputation.
  • Every business enterprise should adopt its own set of ethics relevant to its practices.
  • Individual ethics may affect the reputation of the whole organization.

General Motors allegedly knew about faulty ignition switches linked to 27 deaths and 25 serious injuries (with over 1,000 injury claims still to be considered) for more than a decade. Yet it took a wrongful death suit to force release of internal documents disclosing this knowledge to finally initiate a vehicle recall in February 2014.

In addition to the lives lost and people injured, the company suffered a public relations nightmare that has not only cost it millions of dollars in potential fines and lawsuits, but also seriously tarnished its brand. [Read related article: Some of the World's Biggest Business Blunders]

Why didn't GM act in a responsible manner? According to a Washington Post report, the answer is a corporate culture afraid to pass along bad news. This latest misconduct from GM joins a series of similar stories about serious breaches in corporate ethics that show, at the very least, a lack of common sense.

Stan Mack from Demand Media pointed out that ethical business practices shouldn't stem from financial motivation alone. They should be based on a desire to promote honesty and integrity. But public scandals can damage and possible permanently ruin your business financially – just ask GM.

Here's what your business can do to avoid the knee-jerk "no one will ever notice" response to owning up to mistakes.

1. Publish a corporate ethical code.

Require all employees to read and sign a corporate ethics code. This might seem like a simple set of ground rules, and it often is. But merely having a code isn't enough. You need to ensure your employees know the code and follow it. Otherwise, it could be just like those software agreements everyone signs without really paying attention to whenever you install an upgrade. 

There are two types of code of ethics: longer values and shorter values. Shorter values contain organizational values, statements of general guidelines, aspirations and ideals. Longer values contain specific guidelines with clear perspective for actions to be taken in specific circumstances.

2. Get buy-in from employees.

Employees who are actively involved in establishing their company's ethical code are more likely to act in the prescribed manner. According to Inc, when ethical dictates are delivered in a top-down manner, employees tend to regard the code as out of touch with the issues they face on a daily basis, largely because it usually is. Top management can't know all the issues employees face.

3. Continually revisit the ethical code.

If you already have an established ethics policy, don't assume you can just check that item off your to-do list. You need to present it to new hires, vendors and partners. At least once a year, ask employees to reexamine your code, ask for comments, and make sure it applies to everything you're doing. Even if there is nothing to change, it's not a bad idea to remind everyone of their commitment to act as responsible employees and partners.

Developing a code of ethics is an evolutionary process. With changing world conditions and evolving community standards, a regular review of the code of ethics is critical to ensure it is still up to standards.

4. Confront perceived unethical behavior immediately in an ethical manner.

If you or a colleague thinks something is unethical, the next step is to hold a private meeting with all parties involved. Bring in your HR person or another objective third party to assess all viewpoints, determining what has happened and the next steps. This could range from correcting what was simply a mistake or an oversight all the way to dismissal. Treating employees fairly, even if they've done something wrong or unethical, is an ethical principle in its own right.

5. Disclose problems immediately.

If you've found a problem, tell your company and your customers what happened and how you intend to fix it. Don't wait for someone else to do it for you. Remember, if you've found a problem, someone else probably has or will. The public is likely to judge you less if you openly address a problem rather than hide it from the public scrutiny.

6. Practice what you preach.

There's little point to having a code of ethics if you make exceptions to the rule. Everyone in your company must act ethically, regardless of how long they've been with you, their past contributions or performance reviews, their position in the company, or even whether they are a family member. The only way to run an ethical company is for the company to promote and act in an ethical manner, no exceptions.

7. Enforce policies.

Not all employees will be keen to follow the policies. Do not tolerate unacceptable behavior. Ensure that there are consequences for not upholding policies, and hold your employees accountable. This will prevent the perpetuation of any unsavory behaviors, nipping them before they go out of control.

Here are few tips on how you can ensure policy compliance:

  • Hire a compliance officer.
  • Avoid unnecessary rules.
  • Stay vigilant.
  • Use the appropriate communication channels.

8. Set clear expectations.

The code of ethics must be clear and easy for employees and supervisors to understand. The code of ethics must not contain expectations that employees find hard to comprehend. Where possible, break down the code of ethics into small tasks.

9. Praise positive behavior.

It is essential to praise your employees for what they do right. Acknowledge the small tasks done correctly. This serves as positive reinforcement to those who would otherwise want to go against the code of ethics. Positive employees are more productive, take great pride in their work and accomplish more. Positive reinforcement is such a potent motivating force that the authors of Applied Behavior Analysis – John O. Cooper, Timothy E. Heron and William L. Heward – call it "the most important and most widely applied principle of behavior analysis."

10. Promote community involvement.

Organizations should be involved in community activities and work to make a positive impact in the world. Raise money for local causes and establish volunteer programs for employees. Donating to a worthy cause can go a long way in building relationships with the local community.

business.com editorial staff
business.com editorial staff
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